The Power of Word of Mouth and Building a Growth Strategy

The Power of Word of Mouth and Building a Growth Strategy

Introduction:
In the digital age, where advertising dominance is held by giants like Facebook, Google, and Amazon, it is crucial for businesses to understand the importance of word of mouth. With Apple's recent move to kill user advertising IDs and Google decreasing the prominence of organic search results, companies need to find alternative ways to drive growth. In this article, we will explore the significance of word of mouth, how to measure it, and its impact on a company's growth strategy.

Measuring Word of Mouth:
Word of Mouth (WOM) is notoriously hard to measure, as most of it happens offline. However, online sharing through dark social channels, such as WhatsApp, text, and email, accounts for 80% of all sharing. Companies often try to gauge the word-of-mouthiness of their existing users through metrics like Net Promoter Score (NPS) and attribution surveys. Social listening tools are also used to track mentions and engagement on social platforms. "You manage what you measure," and understanding the impact of word of mouth is crucial for optimizing growth strategies.

Understanding the Word of Mouth Coefficient:
To quantify the impact of word of mouth, a metric called NOPDAU (New Organics Per Daily Active User) was created. It measures the number of new organic users generated by each active user per day. The premise is simple: the longer users engage with a product, the more word of mouth they generate. By focusing on engaged users rather than new users, companies can build strategies that drive retention and, subsequently, word of mouth.

The Relationship Between Active Users and New Organics:
Data analysis reveals a strong linear relationship between active users and new organic users, with an R squared value of 0.958. This indicates that for each new user, a viral loop is expected to generate multiple additional new users. Increasing retention is one way to boost word of mouth, as each new organic user retains and contributes to the growth loop.

Challenges and Insights:
While the WOM Coefficient remains relatively stable throughout the year, seasonal fluctuations occur based on school calendars in certain industries like edtech. Scaling paid advertising can lead to lower-quality users, making word of mouth even more crucial. Additionally, the German sociologist Niklas Luhmann's "zettelkästen" method of note-taking highlights the importance of communicating complete thoughts or ideas to surprise and engage readers.

Actionable Advice:

1. Prioritize engagement and retention: Build your growth strategy around engaged users rather than solely focusing on new user acquisition. This will lead to increased word of mouth and sustainable growth.
2. Optimize in-product viral flows: For industries like edtech, where offline word of mouth is prevalent, find ways to encourage teachers or users to share their positive experiences with others within the product itself.
3. Embrace the power of surprise: When creating content or communication strategies, aim to surprise and engage your audience. Ensure that each piece of communication can stand alone and deliver a complete thought or idea.

Conclusion:
Word of mouth remains a powerful driver of growth in today's digital landscape. By measuring and understanding the impact of word of mouth, businesses can optimize their growth strategies and build sustainable success. Prioritizing engagement, optimizing viral flows, and embracing surprise will help companies harness the potential of word of mouth and unlock new opportunities for growth.